As the economic recession bites harder and erode consumers buying power, real estate developers burdened with a large stock of houses which cannot find buyers, are leveraging the rental market potential to stimulate demand by turning to the rent-to-own homeownership initiative.
The initiative, which is adopted with the aim of enabling developers to remain in business, allows prospective home owners to acquire houses, pay rent on them over a period of 10-15 years and at the end of the period, own the houses.
The rent-to-own homeownership initiatives is gaining traction in the Nigerian property market, considering that the rental market is more active than the sales market.
A recent report on the housing market reveals that over 60 percent of the country’s 170 million people live in rented accommodations and in Lagos, the country’s commercial nerve centre, about 80 percent of its 20 million people live in rented accommodations and spend about 50 percent of their income on paying house rent.
Apart from Lagos which came up recently with this initiative aimed at giving out to the residents about 10,000 housing units developed under the Lagos Home Ownership Mortgage Scheme (LagosHOMS), a few other companies including NatanelFloens Limited and Gran Imperio Group also offer this initiative.
“As at today, we have 500-600 housing units that we have acquired through our partnership with developers. 90 percent of these houses are already tenanted by Nigerians through our rent-to-own initiative. They are now paying rents and amortizing that over the next 15 to 20 years period”, Yinka Daramola, Executive Director at NatanelFlorens, said in an interview.
The growth so far seen in this mode of homeownership is driven by the dwindling purchasing power and the difficulty Nigerians go through trying to own homes. “Out of 13.5 million housing units in the country, about 11.5 are tenanted”, Daramola revealed, noting, “this shows that most of Nigerians seen walking on the streets have no property of their own. They are renting”.
Gran Imperio Group, developers of ‘EssentialHomes’, housing scheme and set out to deliver significant value in the real estate market to institutional, corporate and private clients, has been involved in the construction of more than 2,500 housing units in Lagos.
It is also out to support investors with its rent-to-own initiative. “Our ‘Rent-to-Own Housing Scheme’ is a flexible housing savings scheme for tenants that are anticipating to buy their own property in the next 2 to 3 years; it guarantees rental yield to investors interested in buying our products while we provide potential tenants for their units”, Isaac Etim, the Group’s marketing manager, explained in Lagos.
Unlike the Lagos initiative which requires prospective tenants to make a 30 percent equity contribution, present evidence of Lagos State resident registration and tax payment compliance, NatanelFlorens does not demand equity contribution and charges no interest on the rents while the transaction lasts.
“Our vision as a company is to blaze the trail for others to follow. We are the one that in the real sense of it started this rent-to-own initiative in this market. Today, there are people who are toeing that path but have not been able to deliver as much as we have because, to a large extent, what they are pushing on to the market come with some elements of interest which we don’t ask for. Ours remain zero interest, zero equity contribution and the rate remains flat throughout the duration of that transaction”, Daramola assured would be tenants.
These are not the best of times for developers, many of whom are stuck with unsold houses many of which they borrowed money from banks or other sources to build. “The concern of most Nigerians today is about how to eat and be well, not how to buy property either for investment or homeownership”, says Omochiere Aisagbonhi, President/CEO, Omais Homes.
“Honestly, we have reached a time in this country when we should be asking ourselves questions on what we should be doing to survive”, he continues, disclosing that though there was no known formula to remain in business, his company was considering reviewing their project portfolio with a view to scaling down the size of their future offering and also reviewing the price of existing ones.
CHUKA UROKO
